The Opportunity Cost Approach to Setting a Transfer Price Would

question 15

Multiple Choice

The opportunity cost approach to setting a transfer price would set the maximum transfer price as

• A)the opportunity cost of the firm as a whole.
• B)the opportunity cost of the selling division.
• C)the opportunity cost of the buying division.
• D)none of the above.

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Definitions:

Sequential Consolidation Method

A process of combining financial statements of a parent company and its subsidiaries one at a time in a specific sequence.

Disadvantages

Refers to the drawbacks or limitations that may hinder success or efficiency in a specific context.

Total Indirect NCI

Refers to the total non-controlling interest in a consolidated financial statement that arises from subsidiaries owned indirectly through other subsidiaries.

Retained Profits

Earnings not distributed to shareholders and held back by the company for reinvestment or to pay off debt.